A deal struck between any of the five major U.S. health insurers could cause a domino effect of merger and acquisition activity in the managed care sector, according to Fitch Ratings Inc.

One “mega M&A deal” could prompt other competing health insurance firms to respond similarly “to shore up competitive disadvantages in scale and product lines,” Chicago-based Fitch said in a report released Tuesday.

“Basically, it would just be a competitive response,” Mark Rouck, a senior director at Fitch, said Wednesday, adding that if a health insurer didn't respond to a competitor's merger or acquisition, that firm would be “competitively disadvantaged” when it comes to size and diversity of products.

Similarly, Anthem Inc. and Cigna Corp. have been in discussions about a possible takeover. The Wall Street Journal in a separate report on Monday said Cigna recently rejected purchase offers from Anthem Inc. that valued the firm at $45 billion.

Any deal would “help from an expense efficiency standpoint” and enable health insurers to invest in technology, said Mr. Rouck.

Let's make a deal

Vishnu Lekraj, a senior equity analyst with Chicago-based Morningstar Inc., said Wednesday a domino effect could “definitely be a scenario,” though it depends on which firms make a deal.

For example, if one firm were to acquire a Medicare Advantage-centric insurer, another may have to buy a firm that is commercial-centric, Mr. Lekraj said.

“The bigger you are, the better off you are. And the more diversified you are, the better off you are,” he said.

Any M&A deals would most likely give companies bargaining power with providers and would “lead to more efficiency and better overall long-term health care cost trends for employers,” Mr. Lekraj said.

According to Fitch's Mr. Rouck, health insurer consolidation in the long term is likely to happen, though it's unclear if a deal will be made in the short term. Low interest rates and the assumption that rates would soon increase could prompt a deal sooner, he said.